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The Indo-Pacific Economic Framework for Prosperity (IPEF), an economic strategy proposed by the US, is a new attempt to revise the connection between the US and Asia-Pacific countries.
As an open framework, the success of IPEF is still open to question as there are no trade provisions or potentially reduced tariffs for commercial activities. As such, the participation of Vietnam is largely dependent on the outcome of discussions and implementation.
A new economic framework between the US and 13 Asian countries
The Indo-Pacific Economic Framework for Prosperity (IPEF) was launched by the US in Tokyo and involves a new economic framework between the US and 13 Asian countries.
The US government has reiterated that the IPEF is neither a free trade agreement (FTA) nor a security bloc like the Quad, which involves Australia, the US, Japan, and India. Rather, the IPEF is a loose economic strategy in which participating countries come together to strengthen their relationships and promote economic stability.
The US-led IPEF, can be considered a tool for Indo-Pacific countries to confront the economic challenges of the 21st century. Currently, 13 countries are involved in the framework. Fiji, an island nation, has lobbied to become the 14th country to participate in the discussions regarding IPEF.
The parties involved do not consider IPEF as potential leverage for trade within the bloc since it is emphasized that IPEF is not an FTA.
A counterweight to China
The IPEF mainly focuses on four main pillars:
Together, these 13 Asian countries are expected to make up 40 percent of the world’s GDP. By comparison, the Regional Comprehensive Economic Partnership (RCEP) brings together 15 members, but economic-wise, the weight of RCEP (RCEP member countries generate around 30 percent of global GDP) is exceeded by that of IPEF as proposed.
The IPEF is offered as a counterweight to China but is positioned in a way where the member countries do not have to choose between the US and China, allowing a high level of membership. Participating countries are also free to choose which of the four pillars they want to commit to and there is no obligation to pursue all areas.
Dynamics of sustainable growth
The framework fuels the dynamics of sustainable growth for countries post COVID-19 and global economic instability due to climate change and ongoing political stress. Member countries of the IPEF can collaborate on promoting clean and renewable energy and form a strong alliance bloc whose regional supply chain is inelastic regardless of global supply shock as well as improving administrative transparency.
The framework works as a level playground for countries to exchange and benefit from each other’s economic, technological, and resources advantage. In more concise terms, Southeast Asian nations may benefit from US’ advantage in technology including the production of chips, software, and artificial intelligence.
This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]